- The Fed’s Clarida reiterated that negative rates are not “attractive” for US policy and that YCC (yield curve control) can be reassessed in future if conditions change “markedly”. He also added that low unemployment by itself will not be a “sufficient trigger” for a rate hike.
- The US Treasury is “continuing to discuss Coronavirus aid” with congressional Republicans and hopes a new relief package may arrive next week.
- Big Tech remained in favour with the Nasdaq 100 hitting fresh highs whilst DJI and S&P 500 turned lower. Despite the soft finish yesterday, it was the strongest August month for the S&P 500 since 1986.
- A quiet session so far in Asia with most FX pairs moving around 0-40% of their typical daily ranges. Asian shares have followed Wall Street slightly lower.
- RBA’s cash rate decision is up shortly, although expectations are for them to hold rates at 0.25% with the interbank cash rate futures implying a 54% chance of a decrease to 0.00%.
- A host of PMI data from Europe, UK, US and Canada is released although they are final reads which are typically the least volatile. Still, if it is revealed that PMI’s are downgraded and the V-shape recovery could be bought into question, then this could weigh on risk assets (indices) and be supportive of safe havens (Gold, CHF, JPY).
USD/SGD is Consolidating Below a Resistance Cluster
The trend is clearly bearish and prices are consolidating after pushing to fresh lows yesterday. Whilst this pair has the potential to push higher from current levels over the near-term, we like how there is a strong resistance cluster overhead which may provide opportunity for a short swing trade (weekly pivot point and Fibonacci levels).
It’s worth noting that USD/SGD is one of the few USD/xxx pairs which is not sat near key support levels, so the potential R:R ratio appears adequate.
- Bears can seek potential topping patterns up to / around 1.3600 resistance zone (hammers, 2-bar reversals, double/triple top patterns etc.) ad target the lows around 1.3530 (Weekly S1, and pivotal level).
- Keep an eye on USD/CNH in tandem with USD/SGD as they have a strong correlation. With USD/CNH reting on key support around 6.8450 then it does suggest the potential to pop higher initially.
EUR/NZD Forming a Potential Bear-Flag:
The move lower from the August highs has been hard and fast with minor pullbacks. After finding support at 1.7644, prices have drifted higher in a tight range to form a potential bear-flag. Given the strength of the trend and levels of resistance above, we favour an eventual break to new lows. For now, we wait to see how deep the correction is, or if it has nearly completed.
- A break of the rising support line could signal a bear-flag breakout, although a more conservative approach would be to wait for a break below 1.7644 support.
- If the retracement moves higher from current levels, bears could seek bearish setups below the weekly / monthly pivot resistance zone.
AUD/NZD Supported Ahead of RBA Meeting
We flagged the bearish hammer on the weekly chart two weeks ago to show trend exhaustion. Yet direct losses did not follow and instead a second hammer appeared, which could now turn out to be inverted hammers (bullish) if support continues to hold. We have then flipped back to a bullish bias on this pair.
Price action from the highs appears corrective and support has been found at the 20-day eMA. Assuming no fireworks at today’s cash rate meeting then AUD/NZD could move higher and re-test 1.1000.
- The RBA meet today at 14:30 (Sydney), so there is potential for volatility around this event
- Bias remains bullish above the support zone (38.% Fibs, prior resistance)
- A break above 1.1043 confirms trend continuation
Gold (XAU/USD): – Prices Are Coiling Below Resistance
We’re now waiting to see if gold will play catch-up with Silver’s lead and break higher. Price action had been coiling up within a triangle formation but it appears to have broken out of the triangle with recent price action coiling up near the 1977.92 high.
- A break above 1978 assumes bullish continuation and brings the 2015 and 2075 highs into focus.
- A move lower from current level could favour bearish range traders, with 1910 as their potential target.
AUD/JPY: Bias remains firmly bullish. Intraday traders can seek bullish continuation patterns and / or minor retracements. D1 traders may want to wait for a couple of days of consolidation of a deeper retracement before considering longs as it has had five consecutive bullish days already. Take note that prices have stalled around the 200-week eMA so we may be approaching an inflection point.
USD/CAD: Prices continued to push lower following the Jackson Hole symposium and trade beneath the 200-week eMA. Whilst bears should be pleased with its progress, we’d urge caution entering short around current levels being so close to the psychological round number 1.3000.
Nikkei 25 (JP225): Placed on to the backburner. The potential bull-flag highlighted earlier on Friday never materialised, as a large bearish outside day formed upon the resignation of Shinzo Abe from BOJ (Bank of Japan). However, we’ll continue to monitor its potential for a break above recent highs, in line with the daily trend.
EUR/JPY: Initial target of 126.75 was hit although momentum quickly turned at this key level. Whilst yesterday’s bullish engulfing candle looks promising, we’d prefer to see a break above 127.50 before assuming trend continuation as, at current levels, the R:R ration (reward / risk) appears undesirable.
China A50 (CN50): Removed from watchlist. Whilst it still shows the potential to go higher, yesterday’s reversal back beneath resistance (dark-cloud cover reversal pattern) warns of near-term weakness.
DJI (US30): Prices reached the initial target around the downside gap. Whilst the daily trend remains bullish above 27,442, yesterday’s bearish engulfing candle warns that we are now within a corrective phase. So we’ll step aside for now and reconsider longs if or when prices stabilise to form a higher low, or simply break to new highs.